QUOTE AND NEWS
Forbes  Jun 6  Comment 
Looking at the universe of stocks we cover at Dividend Channel, on 6/8/16, Reynolds American Inc (NYSE: RAI), Lear Corp. (NYSE: LEA), and Johnson Controls Inc (NYSE: JCI) will all trade ex-dividend for their respective upcoming dividends. Reynolds...
newratings.com  May 27  Comment 
MILWAUKEE (dpa-AFX) - Johnson Controls (JCI) and Tyco International (TYC) announced the senior executive team that will lead the combined company following the close of their planned merger, which is expected on or around October 1, 2016. As...
Benzinga  May 24  Comment 
Shares of Johnson Controls Inc (NYSE: JCI) rose more than 2 percent after Credit Suisse upgraded the stock to Outperform from Neutral, saying that TYC and Adient synergies may be "free" at the current price. "[W]e have had a number of concerns...
Wall Street Journal  May 15  Comment 
Johnson Controls recently disclosed in a regulatory filing that its auto-parts spinoff, Adient, will be based in London, and shares in the new company “will be treated as a taxable dividend” for recipients.
Motley Fool  May 2  Comment 
Reporting year-over-year diluted EPS growth of 18%, Johnson Controls had a lot to celebrate. But could have all the news been good?
Wall Street Journal  Apr 29  Comment 
A push into RFID tagging helped auto-parts maker Johnson Controls pinpoint the costly detours of shipping boxes and solve a logistics riddle that grows out of the automotive industry’s sprawling supply chain.
Motley Fool  Apr 25  Comment 
Shares jumped more than 6% following its earnings release. Why was the market so happy?




 

Johnson Controls (NYSE: JCI) makes car interiors and heating, ventilation, and air conditioning (HVAC) products. The company's car parts business is shrinking with the overall US automotive business (the company's automobile sales fell 34% in 2009). Although Johnson Control's automobile components sales generated 42% of 2009 total revenues, the segment lost the company $541 million for the year.

The company is relying heavily on its Building Efficiency and Power Solutions segment, both of which generated the about same amount of segment income at $400 million.

Johnson Controls is one of the few companies, other than energy companies, that is benefiting from higher electricity prices. US electricity prices increased an average of $0.31 per kilowatt hour in 2009, and higher electricity costs encourage building managers to replace their heating and air-conditioning systems with newer, more energy-efficient equipment.

Company Overview

Business Segments[1]

  • Automotive Experience (42% of net revenue): designs and manufactures automotive interiors for automobile companies such as Ford Motor Company (F), General Motors (GM) and Daimler AG (DAI). The company's Automotive Experience products include seats, instrument panels, information displays, headliners and doors. Johnson Control's Automotive Experience revenues decreased 34% in 2009, mainly due to a decrease in sales to the American big three automakers. Although the segment generates a large portion of the company's net revenue, its segment income was -$541 million.
  • Building Efficiency (43% of net revenue): makes heating, ventilation, and air conditioning (HVAC) equipment for commercial buildings. In addition to manufacturing HVAC products, Building Efficiency offers services such as energy efficiency consulting and on site maintenance and property management. The segment's income was $397 million.
  • Power Solutions (14% of net revenue): produces lead-acid automobile batteries. The company sells most of its automobile batteries to aftermarket purchasers through retail outlets like Pep Boys-Manny, Moe & Jack (PBY) and Wal-Mart Stores (WMT). The company also sells batteries to automobile manufacturers. Power Solutions also manufactures absorbent glass matt (AGM), nickel-metal-hydride and lithium-ion batteries that power hybrid vehicles. Although Power Solutions is Johnson Controls' smallest segment, it is the most profitable contributing $406 million in segment income.

Business Growth

FY 2009 (ended September 30, 2009)[2]

  • The company incurred a net loss of $338 million for the period, compared to a get of $979 million in the previous year.
  • Net sales fell 25% to $28.5 billion. Sales fell in all of the company's segments with the automotive (-34%) and power segments (-31%) being hit the hardest.
  • Sales in the Automotive segment fell by more than 25% in all three of the company's geographic regions, with North America suffering the largest loss (-31%).

Trends and Forces

Decreased automobile sales result in decreased sales of Johnson Controls' automobile interiors

In 2009 U.S. sales of automobiles fell to 10.4 million new cars, making it the worst year in terms of car sales in 27 years.[3] The economic slowdown and the instability of the Big Three Automakers is making is more difficult for people to buy cars. When consumers purchase fewer cars, automobile companies buy less interior products from companies like Johnson Controls as they decrease production to meet lowered demand. Despite attempting to minimize the effects of decreased automobile demand by negotiating contracts, Johnson Controls' Automotive Experience revenues decreased by $6 billion dollars between 2008 and 2009.[2]

Exchange Rates resulting in a weak dollar boost Johnson Controls' International Revenue

Because Johnson Controls reports their revenues in U.S. dollars but does 52% of their business outside of North America, it is exposed to fluctuations in exchange rates. If foreign currencies appreciate, the dollar value of Johnson Controls' international revenues increases. [4] In 2009, the unfavorable impact of foreign currency translation was -$2.1 billion.

Competitors

  • Ingersoll-Rand Company (IR) supplies its customers with climate control, industrial, and security products and services. The company's climate control operations, including Trane, compete with Johnson Controls' Building Efficiency products and services.
  • Siemens AG (SI) offers it's customers products and services based on its expertise in electrical engineering. Siemens competes directly with Johnson Controls' Building Efficiency products and services through its Siemens Building Technologies brand.
  • Honeywell International (HON) provides customers with products and services including aerospace products, building products and services, turbochargers, and chemicals. The company's building products and services compete directly with Johnson Control's Building Efficiency segment.
  • United Technologies (UTX) provides technology driven products and services to the building systems and aerospace industries. The company also owns the Carrier Corporation, which competes directly with Johnson Controls' Building Efficiency operations.
  • Lear (LEA) provides automobile manufacturers with seats and electrical distribution systems. The company's seats compete with the seats offered by Johnson Controls' Automotive Experience segment.
  • Magna International (MGA) designs and manufactures automotive assemblies, modules and components such as seats, interiors, metal body systems and metal chassis systems. The company's seats and interiors compete with those produced by Johnson Controls' Automotive Experience segment.

References

  1. JCI 2009 10-K pg. 2-3 and 22-23
  2. 2.0 2.1 JCI 2009 10-K pg. 19
  3. The Truth About Cars "U.S. Car Sales In 2009: Worst in 27 Years" 5 January 2010
  4. JCI 2009 10-K pg. 6
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